Bottleneck Breakthrough Audiobook - Chapter 7 - Management Basics | Ep 28

Speaker A

00:00:01.680 - 00:25:10.040

Lever3 management John Rockefeller said, good management consists in showing average people how to do the work of superior people. Management is consistently undervalued in small business, while it can be overvalued in Fortune 500 companies based on the scorecard of profits.

The Fortune 500 wins this argument. Small business owners equate the topic of management with bureaucracy, creating unnecessary oversight and slowing down implementation in the process.

The problem with dismissing the topic is that it becomes a significant bottleneck, preventing growth at many revenue plateaus. The simplest definition of management, I have found, is directing and equipping people to accomplish goals by using available resources effectively.

Viewing management through this simplified lens helps strip away the negative bias toward it and makes it much easier for most owners to tackle tackle since small business owners resist working on their management skills, I've developed a few key management hacks that generate quick, sustainable results.

They reduce the owner's frustration while also unlocking the potential in their staff or if necessary, helping them replace underperforming staff with better players.

The beauty of improving your management skills with the strategies shared in this section is that your company will grow more smoothly, allowing you to hire full time managers for the different departments sooner. This releases you from day to day management responsibilities as quickly as possible.

It really is counterintuitive for most small business owners since they are repulsed by the structure and rigor of management, but the quicker they master it, the quicker they are freed from it.

If you end up hating the process of improving your management skills, just remember this great quote from Winston Churchill if you're going through hell, keep going chapter 7 management basics Peter Drucker said, the productivity of work is not the responsibility of the worker, but of the manager. In 2006 at a mortgage brokerage that I was trying to grow into more than just a two person business.

We had the process down for getting loans approved with relative ease and I closed prospects well. So I did what so many do at that stage and started hiring more staff.

I'd failed at this a couple years earlier when I was fresh out of grad school and jumped into the mortgage business during its heyday in 2004. This time would be different because I was so much more experienced. Plus I had a steady stream of clients coming in from numerous referral sources.

I hired a dedicated loan processor, a graphic designer to help with marketing, and even landed a few interns from the local university to do what? I wasn't sure. The excitement was high for a few months, but then the reality set in that there was a lot of activity but no real growth.

There was just more cash going out the door than before.

I didn't have a clue that each staff member needed clear job responsibilities, so I'd give them vague instructions and hope that everyone would figure out what to do. To be honest, I didn't know how to set priorities or stick with a plan long enough to get it off the ground.

I was a total visionary who could see 10,000 steps ahead but didn't know what to do next to turn it into reality. Needless to say, by August 2007, when IndyMac bank went under, the wheels were already about to fall off.

I think the credit crisis saved me from a long, slow, slow death and mercifully put me out of my misery by early 2008. Since then, I've realized that I made every mistake in the book, and I've seen most business owners make them too.

If you're like most of my clients, the topic of management is pretty low on your interest list, somewhere between taxes and root canals. It is mundane to me too. Unfortunately, mastering management is required to build a successful company.

This chapter explains the hacks I've created over time to make management as simple and effective as possible, so it stopped being a bottleneck to growth for my clients.

You could say they are the bare minimum I could come up with to solve management bottlenecks so I could keep working with clients on strategy and marketing opportunities. Like most hacks, they work surprisingly well and can take you much further than you would expect.

I guarantee you will never see most of these hacks published in a management journal or taught in a professional development course. But if management has become the bottleneck that is preventing your company from growing, I know they will help you.

In the next chapter, I'll go over the single activity that will let you implement all of these hacks in one step, making it as easy as possible to get results. But don't skip ahead until you read this chapter and identify at least one mistake you're making right now.

The activity I'll describe in chapter eight will work better with a clear bottleneck to fix unstated expectations.

In early 2007, two of my employees managed to see the writing on the wall and abandoned ship on the same day that I happened to be leaving for a long weekend at a conference, my wife offered to jump in and help, thinking she could alleviate some of the stress I was buried under at that point. It was our third year of marriage, and looking back on it a decade later was clearly the toughest one by far.

If I expected employees to just figure out how to do their job. My expectations for her were 10 times higher. I had a short fuse because my ego was so wrapped up in being an entrepreneur.

When she would come to me with concerns that the ship was taking on water, I exploded. I I had a freaking MBA in entrepreneurship so there was no way I was going to admit defeat.

As the pressure of working together was about to crush us, we sought counsel on how to make our marriage healthier. When I was trying to figure out why we were fighting so much, a conversation with a mentor led me to the label of unstated expectations.

It was the perfect term for what we kept running into in our marriage. I expected her to do whatever I demanded at work and she expected me to listen and respect her.

Obviously the issue was on my end, but without stating these expectations, we were setting each other up to fail. That phrase transformed our marriage. Since then, it has been our go to solution.

When we start getting short with each other, we check in and see what unstated expectation the other has and it diffuses the situation instantly. We both know we can't be mad at the other person for not being able to read our mind.

I believe that unstated expectations are the cause of most friction in all relationships, whether marriage, parenting, friendship, or work. When we expect something of another person that they are not aware of and they don't meet it, all manner of disappointment sets in.

I see this with my clients all the time. Business owners have the habit of believing that how they think is common sense and that it is handed out to everyone like candy on Halloween.

They think it's common sense to show up on time to call ahead if you're going to be late, to double check all of your grammar and email communication, and never to yell at anybody on the phone. Their list of unstated expectations is seemingly endless, regardless of how skilled, experienced, smart or attractive an employee is.

If you're not stating clearly what you expect from them on a daily basis, any failure on their part to perform is 100% your fault.

I know you might have a million examples where their failure to use common sense created a bad outcome in your company, but it's your job to lead and manage, and that involves giving clear instruction.

A good rule of thumb if you're expecting staff to read your mind or use common sense is to count how many times you get frustrated with them in the course of a week for not getting something done.

If it happens more than zero times a week, I guarantee you're not being clear enough on what you expect them to do without telling them the rules of the game. There's no way you can judge them for not scoring. If you feel like the situation is turning you into their parent, keep reading.

Change your perspective. An employee I fired after only a few weeks of working with us filed for unemployment and listed my company as a past employer.

The EDD sent me a notice of the claim, so I responded with my case that she was warned multiple times for her bad attitude. I even mentioned that she admitted she should be fired after the final confrontation.

They still ruled against me because I didn't produce three reprimands signed by her showing that she was given a fair chance at resolving her character defects to try to keep her new job. Needless to say, I was furious.

I told a mentor that it felt like the EDD viewed every employer as though they were as ruthless as Steve Jobs and every employee as though they were a helpless third grader. Now I used a few more adjectives for emphasis.

She wisely told me to let it go and move on, but the jobs versus third grader analogy stuck in the back of my mind. I started wondering what would happen if I viewed employees like third graders or eight year olds.

It's a funny exercise, but it unlocked something pretty amazing for me.

First, as I write this, my oldest child is 8 and I would never expect her to know everything that I know, but she's capable enough to be given directions and to follow them.

Her brain is developed enough to connect some obvious dots, but I wouldn't expect her to pull off the high level strategic deduction that I do every day to solve problems. Although she definitely surprises me with some of her insightful observations.

At my mortgage brokerage, I started viewing my employees as 8 year olds and after only a couple weeks I had an epiphany. I was no longer frustrated with them. Honestly, all of my previous frustration with them vanished. I was more willing to explain how to do things.

I coached them more instead of snapping at them when I saw something that could be improved. I had more patience with them and they seemed to appreciate all the changes in me too.

Whenever I tell clients to try viewing their employees like 8 year olds, it always gets a chuckle because they think it's a joke of some kind. Of I'm also waiting for the day when an employee catches wind of it and he punches me in the face for suggesting it.

Really, there's no disrespect in the perspective shift for me as I don't think I'm better than they are or that they're stupid.

It just helps me see that they need more support at times to do their job better because I know significantly more about running every part of the company than they do.

If somebody with 20 years experience shows up and they are finishing your sentences because they're so knowledgeable, then you might try viewing them at the stage of a 12 year old. They have more experience and may know how to do X, Y or Z, but you'll still want to validate it.

Double check their deliverables while they earn the trust to have more responsibility and autonomy. Never trust any new employee based on face value, even if they have great referrals.

This isn't because you should become a cynic, it's just a proven recipe for disaster three or six months down the road once you realize they were failing miserably because you weren't double checking them occasionally, regardless of how experienced they might be, they probably don't do things the way you do.

Trust me on this one and give it a shot Top Function of Management if we view the role of management as being sandwiched between the frontline employees they're directing and the owner they're reporting to, then there is only one key function management Equipping staff to do their job.

As I've said earlier, small business owners rail against the topic of management because they think of it as the bureaucracy that permeates big business and government. Paring it down to the idea of helping staff do their job causes it to become immediately valuable to them.

It also makes it easier to keep managers more accountable for their performance while managing staff. A common bottleneck shows up when staff aren't completing their tasks.

Realizing that there are only two reasons someone doesn't do their job helps clear the bottleneck and avoids all the excuses in the process. The first reason is they don't know how to. The second reason is they don't want to.

When they don't know how, it's the manager's responsibility to provide the training or the tools they need to do it.

My recommendation is that every time you teach someone how to do something that might be done again by anyone in the future, write it down and save it in a Google Doc. I even use screen capture software which you can find at BBG li screenshot to record the steps and save it with the document.

This becomes the foundation for systems that we'll cover in the next section. When someone doesn't want to do a task, it could be due to an attitude problem or their personality not being a good fit for the task.

If they excel at certain tasks but perform poorly at others, then it's likely a personality issue and it would make sense to find someone else to do the tasks they hate.

In the case of an attitude problem, I find that explaining how the task is valuable to the company on a larger scale can help them see the significance of their role and to develop some team spirit. Most employees want to contribute to what matters in the company, so give them a chance to see how their tasks do that.

If the employee is just a prima donna and doesn't want to do the job, then you need to decide if they're worth making an exception for or if they need to be given an ultimatum. Personally, I have a lot of grace for top performers who can be high maintenance at times.

They're almost like savants, delivering massive results in the things they're great at but worthless outside of their area of genius priorities. Most employees have more on their plate than they can handle.

The recession led many companies to discover that they can get by with less staff, requiring the remaining employees to be more productive. The problem I see repeatedly is that the owner doesn't communicate priorities enough with their staff.

This leads to employees completing tasks based on two criteria. First, whatever is easiest or second, whoever they're most afraid of disappointing.

There are a lot of tasks that are easy to do but don't move the needle at all for the company.

Whether it's filing paperwork, calling maintenance to fix a leaky faucet, ordering office supplies, or any other mindless task, it's easy to fill many hours with them. Then there are the tasks that employees complete out of fear. Typically, they're afraid of one of the co founders in the company more than the others.

Or they want to stay on the good side of a key employee doing their bidding, even if that employee has no authority to direct them. The solution to both of these issues to help employees prioritize their tasks. Telling them what you expect instantly cuts through their uncertainty.

Plus, I find that the majority of employees love to get this kind of clarity from you.

It lets them focus 100% on completing the right tasks so they stop wasting their mental energy on second guessing whether they're doing the right things. Decision making is exhausting, especially when you don't have the authority to go with it.

Responsibility plus Authority As a business owner, you've probably never noticed the balanced relationship between responsibility and authority. That's because you have complete control over both.

You own the business, which makes you 100% responsible for its survival, and you have 100% authority to make any decisions that would increase its chances for success. The people who do notice the relationship of responsibility and authority are those who don't possess them in equal amounts.

Every case I've ever seen of responsibility and authority imbalance happens when an employee is given the responsibility of creating a specific outcome, but doesn't have the authority to do what is necessary to make it happen. This isn't quite hell, but it sure is close, so I refer to it as employee purgatory.

It's like Sisyphus being responsible for rolling the rock up the hill but not having the authority to build a platform to store it once he gets there, so it keeps rolling back down.

Imagine a marketing director who's responsible for capturing leads on the website for the sales team, but who doesn't have the authority to fire the incompetent web development team. Every time the marketing director makes a recommendation to the website team, they botch it and end up breaking other parts of the website.

The marketing director is blamed for the website issues, his requests cause, and for not generating enough leads even though he's not able to do anything about it because he lacks authority.

This type of situation is the fastest path to employee burnout because the stress of responsibility without authority to ensure competent performance is unbearable. I believe this one imbalance is a major contributor to more heart attacks on Monday morning than any other day in the week.

I would not be surprised to learn that it contributes to two of the top three causes of death for people aged 35 to 44 suicide and heart disease.

To uncover where you're giving employees responsibility without authority, just pay attention when they come to you for approval to implement solutions that will help them do their job. Start giving them more authority to solve problems on their own, extending it over time as they prove capable of handling it.

My favorite way to do this is to ask them, what do you think you need to do this right? When they answer with something you approve, say great, go for it, and you have the authority to do this without my input.

In the future, you'll instantly notice that the Got a minute? Meetings drop significantly and employee attitude will dramatically improve. With the added trust you've given them, it really is a win win.

Plus the chances of them getting a heart attack next Monday will go down too. Org Charts for most of my clients, the idea of having an organizational chart seems like the start of a slippery slope to bureaucracy.

As the owner, you fill every role out of the gate anyway, so creating a chart just to put your name on it is a pointless exercise.

At some point, typically around 500,000 a year, it makes sense to start organizing all the tasks and group them into some logical categories to develop staffing positions around. As you might guess, these categories then become the foundation for roles in an org chart.

It's just the logical outcome for making sense out of the chaos that comes from running a business. Every company outside the Fortune 500 struggles to keep employee roles and responsibilities clear.

This is especially true in companies under $1 million in annual revenue, since everyone on the team is likely capable of performing a variety of tasks, able to roll up their sleeves and jump in and get stuff done anytime things start breaking down, when there's no clear assignment of responsibility for a task resulting in things falling through the cracks because someone assumed someone else was going to take care of it. As the owner, it's your responsibility to clarify roles and assign tasks and responsibilities.

A lot of organizational management philosophies have appeared over the past couple decades.

As famous and charismatic entrepreneurs become billionaires, publishers flood the market with books about them that claim they will show you how to duplicate their success. I'm not going to cover any of those approaches here because I don't think outlier celebrity cases are duplicable.

With that said, let's dive into the process of getting some role organization in your company in order to make it run better. The fundamental design of org charts shows that every employee has one clearly defined boss, and I define boss as a person in charge of a worker.

It could be a supervisor or manager, but I think boss defines it best. This is shown by the line going from their role to the one above it.

This may seem obvious in companies with fewer than 10 staff, since everyone deals directly with the owner. Once you get beyond this stage, clarity about supervision can pose serious headaches if you aren't aware of or operating by it.

Let me tell you about a CPA I know of. He's one of four partners in the firm and they have around 20 staff.

It was early April and he had to go out of town for a meeting with a big client, but still had a mountain of tax files to prep and review before the 15th.

Before he left, he delegated two important tasks to two different people, giving them clear instructions and deadlines for work that needed to be completed before he returned. When he came back to work, he found that neither of the tasks had been completed.

Both staff members made excuses about other things having come up and not being able to get to the work. Needless to say, the partner was livid about this and had to work incredibly late for two nights to complete the work before the deadline.

I asked him what he did to confront their failure to deliver, and he said he couldn't do anything. He felt handcuffed.

The problem was that the staff members were not accountable to a specific person, so they would do whatever was easiest or whatever kept the most frightening person away. In this case, the senior founding partner was the only one who always got his way.

He was the unstated boss, but he was semi retired at this point, so he wasn't interested in managing anyone or directing their work.

The other three partners were left to pick staff favorites and hope they would deliver, but they felt completely paralyzed when it came to confronting or disciplining staff members if they failed to perform. This may seem like an extreme example, but I see it all the time in companies with more than one owner.

The solution is to give every employee a boss, typically one of the partners, and have that boss handle prioritization, support and discipline, regardless of who delegated the task.

It can be tedious having to go through your partner to confront an employee who left you hanging, but the increased accountability and clear path for discipline is worth it in the end.

The other benefit of giving every employee a boss is that when an employee gets overwhelmed with tasks from different superiors, it gives them a place to go for help prioritizing it all. As I said earlier, deciding on priorities is a major source of stress.

Helping alleviate that stress results in employees delivering more quickly and with higher quality every time, and this works especially well in cases where employees receive tasks from multiple sources.

A key point about the one boss per employee approach is to make sure that you're not undermining the structure by bypassing someone's boss and changing the priorities or disciplining frontline staff directly. This is a recipe for confusion and eventual conflict between you and their boss for not following the agreed upon structure.

In the end, you'll have increased freedom to run the company when you follow it. So just let go of the need to control everything and it will work for you.

Another argument against org charts is that you don't have enough employees to fill every role. The reality is that most employees wear multiple hats, so just put their name in as many roles as they are responsible for.

You'll find that your best staff are doing a number of things, in some cases spreading themselves too thin but still managing to deliver fairly consistently. This can be a huge lever to pull.

It will get your top staff more focused on the key activities that actually move the needle and will eliminate lower priority tasks.

One client found that a top performing engineer on the team was stepping up to manage relationships with key municipal clients, except exceptionally well, but he's also doing a lot of basic design work that could be handed to CAD designers. They ended up making him the lead engineer for their largest client, which allowed him to apply his relationship and strategic planning skills.

Tripling the revenue from that client in the process identifying his greatest skills and reassigning all the low level priority tasks was well worth over a million dollars in new revenue to this company.

Stinky Fish As a consultant, I find myself trying to boil down advice as much as possible to simple, easy to understand concepts so my clients will remember them and take action. This leads me to use quips and catchphrases that I end up using endlessly.

A side effect is that my wife gives me grief for how many times she's had to hear them over the years. But one phrase that I find my clients repeating back to me more than any other and warming my heart every time is the fish stinks from the head down.

This is the word picture I give them anytime they are complaining about a dysfunction in their company that is a result of their behavior as the leader. I sell it to them as an old Chinese proverb to help it stick a little better.

Even though every nationality throughout history claims to have originated this aphorism. In essence, you create everything in your company as the leader of it. Good or bad, it's all you're doing.

A great example I always mention is the client who had invested over $40,000 into a CRM. It happened before they worked with me, of course, since I would have steered them to something more practical.

Two of the owners of the company were the top people in the sales department, which had five additional sales staff.

While I was helping them with their marketing plan, I asked for a report from the CRM to see how they were tracking lead sources to better analyze what was working and what was a waste of time.

To my surprise, they gave me a batch of spreadsheets that had been maintained by an assistant completely outside the CRM and with no lead source tracking.

Scratching my head, I asked why they couldn't pull the reports from the CRM directly, and I was told that the data in it was unreliable since it wasn't used very much.

Neither of the owners used it and there wasn't a sales manager in place to force the sales staff to use it either, so it just sat there, completely ignored.

One partner didn't like the accountability of having to input everything, so the employees followed his lead and gladly avoided the Accountability too.

You can imagine the implications of not using the CRM, from horrible forecasting for use by their production team in their planning to no lead scoring or analysis of their long sales cycle. The spreadsheets contain limited data because they were manually maintained by the assistant.

Plus, the cost of an assistant to maintain the spreadsheets was around $20,000 a year.

The greatest irony was that the partner who pushed to get the CRM deployed was always complaining that they needed a better system and was constantly chasing the latest shiny new object in the market, wasting time with CRM demos and proposals A common and worthwhile leadership approach is to never ask your employees to do something you wouldn't be willing to do yourself.

This is a good rule of thumb, but it falls apart quickly when you get into specialized activities, especially rote and detailed tasks that most entrepreneurs aren't wired for.

Regardless of the dysfunction you're trying to resolve, the key is to identify your behavior that is enabling the dysfunction and to short circuit that behavior.

In the case of the client with the $40,000 CRM, one of the partners hates documenting things and refuses to update his prospects and pipeline using it, so he should just have his assistant do it so they can include his numbers in their forecasts and reporting. Then they need to require the sales staff to keep their leads updated to the same standard or better.

Having accurate data will improve their analysis and allow them to make better decisions, putting the investment in the system to good use.

Action Steps in the next chapter, I'll go over the single activity that will let you implement all of these hacks in one step, making it as easy as possible to get results. Before you dive in there, answer these questions.

First, where do you have common sensitis coming up in chapter 11 that causes you frustration with your staff? Second, when was the last time you trained someone how to do a key part of their job?

Third, who have you given responsibility to but not authority to do what's necessary to get results? And finally, what bad behaviors are you modeling that allow your staff to skate by because they're just copying you.